Sustainable Energy Transmission and Supply Development Fund (SETS)

 

ENERGY DEVELOPMENT FINANCE PROGRAM

Loan Participations, Direct Loans and Guarantees

Introduction and Background

The ASSETS Act created new programs and powers within AIDEA and addresses the state’s energy needs by offering a number of energy development financing options, including loans and guarantees. The ASSETS program is an important expansion of AIDEA’s tools and is part of an effort to provide lower cost, sustainable energy across the state.

The ASSETS program has three components: Loan Participation, a Direct Lending capacity, and a Guarantee program. The direct lending program will be focused on loans over $5 million per borrower because the AEA’s Power Project Fund (PPF) loan program offers energy project loans for projects at a cost of $5 million or less without the need for legislative approval. PPF applications for more than $5 million must receive legislative authorization to be considered. Under ASSETS, a project demonstrating financial and engineering feasibility, will be better positioned to access private financing sources, including state financial institutions and the broader capital market in order to leverage public dollars.

AIDEA Loan Participations for Qualified Energy Development

The ASSETS legislation expands AIDEA’s existing loan participation program to include “qualified energy developments.” Under AIDEA’s loan participation program, a party seeking a loan works directly with a financial institution such as a bank or credit union. The financial institution must decide that the potential loan meets its underwriting standards and then present an application to AIDEA on behalf of the borrower(s). Under AIDEA’s loan participation program for qualified energy development, the program is expanded to cover a variety of energy projects, including energy efficiency measures for reducing building energy consumption.

AIDEA can purchase up to 90% of a participating loan to a maximum of $25 million. This program offers permanent financing to borrowers through a qualified originator for the purpose of financing “qualified energy development.” 

 

Eligibility Requirements:

Click here to find an eligible financial institution.

AIDEA Direct Energy Development Loans

Under the Sustainable Energy Transmission and Supply [SETS] Development Program, AIDEA is authorized to make direct energy development loans from the ASSETS fund.  Unlike the loan participations, a borrower can apply directly to AIDEA for an Energy Development loan. However, AIDEA can only make a direct Energy Development loan or guarantee in the amount of one third of the overall cost of a qualified energy development up to a maximum of $20 million, without obtaining prior legislative approval. This means that under the direct loan limitations set forth in the ASSETS legislation, AIDEA can make a direct loan only up to one third of a project’s cost. See AS 44.88.700 et seq. The other two thirds of funding for a qualified energy development must come from other sources, such as, private equity, debt or grant funds.

AIDEA is authorized to make direct energy development loans from the SETS Fund. Unlike loan participations, a borrower can apply directly to AIDEA.

Eligibility Requirements:

  • Projects Geography:
    • Within the State of Alaska
  • Business Structure:
    •  Sole Proprietorship, Cooperative, Corporation, Firm, Partnership, or other association of persons organized in any manner, for any credit worthy business purpose.
  • Qualified Energy Development:
    • Includes the
      • (A)  transmission, generation, conservation, storage, or distribution of heat or electricity;
      • (B)  liquefaction, regasification, distribution, storage, or use of natural gas; in this subparagraph,
      • (i) "distribution" does not include a natural gas pipeline project for transporting natural gas from the North Slope or Cook Inlet to market unless the pipeline has a diameter of 12 inches or less and transports the natural gas to Interior Alaska;
      • (ii) "natural gas" includes propane or propane and air mixture;
      • (C)  distribution or storage of refined petroleum products.
  • Terms:
    • Maximum Loan Amount: $25,000,000.
    • Maximum term: 25 years.
    • Fees:
      • $1,100 non-refundable application fee;
      • 1% commitment.
    • Rate: fixed or variable (see current rates).
    • Maximum Loan to Value: 75% of collateral

    AIDEA Loan or Bond Guarantees

    • Projects Geography:
      • Within the State of Alaska
    • Business Structure:
      •  Sole Proprietorship, Cooperative, Corporation, Firm, Partnership, or other association of persons organized in any manner, for any credit worthy business purpose.
    • Qualified Energy Development:
      • Includes the
        • (A)  transmission, generation, conservation, storage, or distribution of heat or electricity;
        • (B)  liquefaction, regasification, distribution, storage, or use of natural gas; in this subparagraph,
        • (i) "distribution" does not include a natural gas pipeline project for transporting natural gas from the North Slope or Cook Inlet to market unless the pipeline has a diameter of 12 inches or less and transports the natural gas to Interior Alaska;
        • (ii) "natural gas" includes propane or propane and air mixture;
        • (C)  distribution or storage of refined petroleum products.
      • Terms:
        • Loan Amount: Maximum: 33.33% of total project cost up to a maximum of $20,000,000 without legislative approval.
        • Maximum term: 30 years except for hydroelectric projects which can extend out 50 years.
        • Fees:
          • Preliminary application: none
          • Full application fee: (non-refundable)
            • $5,500 for financing less than $10,000,000
            • $11,000 for financing from $10,000,000 to $20,000,000
            • $22,000 for financing in excess of $20,000,000
          • Commitment fee: 1% (non-refundable)
        • Rate: fixed or variable (see current rates).
        • Maximum Loan to Value: 75% of project cost.
      • To apply download preliminary application here.

       

      Fee Schedule

      Application Fee: $11,000 due with submission of complete application, non-refundable.

       

      Commitment Fee: 1% of loan amount lent or guaranteed, due upon signing of commitment letter, refundable if not closed within 90 day closing period; reimbursable with loan/bond proceeds.

       

      Closing Costs: Actual out-of-pocket expenses incurred by AIDEA for legal counsel, engineering, environmental and other technical evaluation services as well as site visit costs and other relevant expenses.  Such costs may be reimbursable at closing from the proceeds of the financing.

       

      Guarantee Fee: to be charged based on the guarantee of the SETS fund for a particular loan.  Structured as an up-front charge paid at closing and based on the percentage of total principal and interest guaranteed.

      Confidentiality Provisions

      AIDEA understands that during early stages, a proposal may be or include proprietary information about the project, the market, the competition, and other factors that if made public, could potentially jeopardize the viability of the project. Therefore, if confidential information is included in this submittal, please note as such: “This document is non-public, confidential, proprietary and not subject to public disclosure per AS 44.88.215.” See statute below.

       

      Sec. 44.88.215. Confidentiality of records and information

      (a)  In order to promote the purposes of this chapter, unless the records or information were a matter of public record before submittal to the authority, the following records and information shall be kept confidential if the person supplying the records or information or the project, bond, loan, or guarantee applicant or borrower requests confidentiality and makes an adequate showing to the executive director of the authority that the records or information are:

       

      (1)  income tax returns;

      (2)  financial statements, profit-and-loss statements, and cash flow projections, except the information required by the authority to calculate debt service coverage on the loan;

      (3)  financial business plans;

      (4)  credit reports from consumer reporting agencies and other credit information obtained from banks, creditors, or other credit reporting entities;

      (5)  trade secrets, including confidential proprietary information and confidential information about products, pricing, or manufacturing or business processes;

      (6)  appraisals, except the name of the appraiser, the date of the appraisal, and the fair market value determined for the property appraised;

      (7)  market surveys and marketing strategy information; or

      (8)  any information required to be kept confidential by a federal law or regulation or by state law.

       

      (b)  Information compiled by the authority from information described in (a) of this section shall be kept confidential unless disclosure is authorized by the person supplying the information and by the project, bond, loan, or guarantee applicant or borrower.

       

      (c)  The records and information that the executive director of the authority determines to be confidential under (a) or (b) of this section are not public records under AS 40.25.110 - 40.25.220.

       

      Nothing in this section shall prevent a legislator from reviewing information otherwise confidential under this section if the legislator has a valid legislative purpose for reviewing the information and if the legislator agrees to maintain the confidentiality of the information.

      • Projects Geography:
        • Within the State of Alaska
      • Business Structure:
        •  Sole Proprietorship, Cooperative, Corporation, Firm, Partnership, or other association of persons organized in any manner, for any credit worthy business purpose.
      • Qualified Energy Development:
        • Includes the
          • (A)  transmission, generation, conservation, storage, or distribution of heat or electricity;
          • (B)  liquefaction, regasification, distribution, storage, or use of natural gas; in this subparagraph,
          • (i) "distribution" does not include a natural gas pipeline project for transporting natural gas from the North Slope or Cook Inlet to market unless the pipeline has a diameter of 12 inches or less and transports the natural gas to Interior Alaska;
          • (ii) "natural gas" includes propane or propane and air mixture;
          • (C)  distribution or storage of refined petroleum products.
        • Terms:
          • Guarantee Amount: Up to a maximum of $20,000,000 without legislative approval.
          • Maximum term: 30 years except for hydroelectric projects which can extend out 50 years.
          • Fees:
            • Preliminary application: none
            • Full application fee: (non-refundable)
              • $5,500 for financing less than $10,000,000
              • $11,000 for financing from $10,000,000 to $20,000,000
              • $22,000 for financing in excess of $20,000,000
            • Commitment fee: 1% (non-refundable)
          • Guarantee fee:
            • One time fixed amount.
            • One time percentage of the principal amount guaranteed.
            • A recurring annual fixed amount.
            • A recurring annual percentage of the principal amount guaranteed.
            • Any combination of the above options.
          • Rate: based on transaction type.
          • Maximum Loan to Value:  75% of project cost.
        • To apply download preliminary application here.
  • The third major function of the SETS fund authorizes AIDEA to issue a guarantee on a loan or a bond used or issued to finance a qualified energy development. An AIDEA guarantee used in conjunction with a financial institution loan or a bond may allow eligible borrowers to obtain lower cost funding in the private markets.

     

    AIDEA believes that the ASSETS program is designed to provide significant financial benefits to eligible applicants and make substantial progress in Alaska’s efforts to bring cost effective energy to all of its citizens.

     

    AIDEA is authorized to issue a guarantee on a loan or a bond used to finance a qualified energy development. An AIDEA guarantee used in conjunction with a financial institution loan or a bond may allow borrowers to secure financing and/or obtain lower cost of funding in the private markets.